In the last few days France has expressed seemingly hard-line views, in a letter circulated to other EU countries, on the demands presented by David Cameron ahead of a referendum on the U.K.’s membership in the Union. But the document mostly reiterated what Paris has said ever since the beginning of the Brexit challenge — and it must be seen primarily as a tactical ploy paving the way for compromise.

France’s position in a nutshell is that no effort must be spared to keep Britain in the EU, and everything is pretty much negotiable — with one major caveat: Don’t mess with our eurozone. In other words, the U.K. shouldn’t be given any new power to veto steps the monetary union might consider in the future to integrate further.

U.K demands on the matter have been vague, beyond trying to obtain some sort of assurance that the eurozone won’t systematically gang up against non-euro EU countries. A French finance ministry official said that as last-minute negotiations on Cameron’s wish list were underway it was still hard to see what London really wants on this particular point.

“We have the feeling it’s more a City of London thing and an [U.K. Chancellor George] Osborne thing than a Cameron one,’” the official said. “I don’t see the U.K. referendum campaign developing along the lines of ‘See, we got a veto on financial regulation!’”

The question of the interaction between eurozone and non-euro EU members has emerged as a crucial one ever since the debt crisis threatened the very existence of the common currency, leading its participants to take steps towards closer integration.

France also wants to make sure that no extra power be given to Britain or any other country to veto future financial regulations in the EU as a whole.

For London, those reforms are both a source of relief — the eurozone is by far the U.K.’s largest trading partner, and its implosion would have hurt the British economy badly — and of worry: What happens to the “single market” dear to London if some members become more “single” than others?

But coming at a crucial time in the talks between the U.K. prime minister and European Council President Donald Tusk, just over two weeks before an EU summit that many still hope will be decisive, the French position paper is a reminder that the Brexit game is one in which optics count as much as substance.

That explains why French officials remain sanguine. The challenge for the European Commission and the big EU member states, one of them noted, is to give Cameron the deal that lets him campaign on the “concessions” he wrestled away from Brussels. But at the same time no one wants to look like the loser in a deal designed to show the U.K. as a winner.

Hence the French tactic, which seems to be to draw supposed red lines that no one is really keen to step over anyway in order to be able to claim later that France stood firm in a negotiation that produced – surprise! — the desired results.

So Paris wants to make sure the U.K. doesn’t have any veto power on eurozone matters? But London isn’t really asking for it. On the contrary, U.K. government officials have long stated that they welcomed a more integrated, stable eurozone.

What France really wants

None of the further steps being contemplated by the monetary union at the moment — even as far-fetched and distant as a joint insurance scheme for bank deposits, or a eurozone finance minister — can raise serious objections in the City.

In the longer term, however, the fear in London is that the eurozone might be tempted to take steps that could end up as de facto protectionism against the rest of Europe in matters such as taxes or capital markets liberalization.

It is in theory the Commission’s job to guarantee the single market’s integrity, and the European Court of Justice’s to rule on any conflict. The Court has been vigilant on this, to the point of slapping down last year a decision by the European Central Bank to force euro clearing houses to be physically based in the eurozone. In any case, the U.K. has never been penalized in the past.

France also wants to make sure that no extra power be given to Britain or any other country to veto future financial regulations in the EU as a whole. But that can be worked around — as shown, for example, for the voting procedure at the European Banking Authority, the body tasked with coordinating banking supervision throughout Europe. There a double majority is required — both from the “euro-ins” and the ”euro-outs” — for decisions to be taken.

Some type of similar system could possibly be worked out on matters that are dear to London but, as a French finance ministry aide noted, “We all know that the number of ‘euro-outs’ will dwindle over the years.”

Of the nine non-euro EU members that remain, only two — the U.K. and Denmark — have a permanent opt-out. All the other ones, depending on local politics and the state of their economies, are supposed to join at some point. “Do we want to give the U.K. a veto power of one?” the aide asked.

The suspicion in Paris — and in Berlin as well — is that London wants veto power over all matters it would consider contrary to the interests of the City.

“For several years now the U.K. government have been schizophrenic about this,” said a French diplomat. “They’re out of the euro, but London is in fact the financial capital of the eurozone, and they behave as if the City was just a Brit thing.”

The real hope in continental European capitals is that (although this fact is rarely heard in the British political debate these days) the U.K. government will drop its requirement of quasi-unanimity on financial regulation. After all, none of the reforms of recent years has ever been passed over London’s objections or even reservations.

And save for the specific industry of hedge funds, most of the City’s players remain hostile to leaving the EU anyway, whatever Cameron’s deal looks like.

trisul

The French view seems completely logical and reasonable to me. Surely, it is Cameron’s DEMANDS that are hardline, not the French response. How can you be more hardline than demanding that 28 countries follow your own interests?

You summarize the topic “France’s Brexit gambit” clearly within a very short line. Hope you will share more further.Latest News Time

Posted on 2/6/16 | 8:51 AM CET

Luhego

This Pierre Briançon is misinformed.
During the 2010-2011 crisis in the negotiations that let to EFSF and the EFSM and eventually the ESM: the UK blocked a reform of the Lisbon Treaty pushing the eurozone towards collapse and relishing the moment.
Event though they were excluded from chipping in.

So, yes, What they want is a veto. Not for London. But against Frankfurt.

Not the British, but the Tories will use any new veto power the moment it hurts the most to the EU.